WASHINGTON -- The economy is looking pretty good to bank economists these days, but that's not to say there aren't a few warning clouds in the sky.
"There's a tame, cyclical rise in inflation," said Stuart G. Hoffman, senior vice president and chief economist, PNC Bank Corp. "It's a tame rise, but nonetheless, it's going in the wrong direction.
Mr. Hoffman, speaking for the economic advisory council of the American Bankers Association, which met here this week, said the economic expansion should continue unabated for at least the next six calendar quarters.
"We see little risk that the economic expansion will experience any kind of economic downturn," he said Wednesday. The 11-member advisory committee met Tuesday with the Board of Governors of the Federal Reserve. Among those present was the Fed's newest member, Alan Blinder, who had been sworn in only the day before.
Although the ABA economists gave the Fed their views on what needs to be done on monetary policy, they didn't get much back, Mr. Hoffman acknowledged. "They are adept at keeping their cards close to their vest," he said. "But they have been very responsive to our group."
What the economists told the Fed was to resist the temptation to tighten up further on the economy.
The group was nearly unanimous in recommending against an increase in the federal funds rate or the discount rate on the basis of recent events," Mr. Hoffman said.
Among events uppermost in the minds of policymakers now is the dollar's slide against the Japanese yen and the German mark. But Mr. Hoffman said his group isn't that worried about the dollar. "Our view is that the dollar is not likely to suffer a steep, broad-based decline," be said.
However, Mr. Hoffman said, the economists were pleased that Treasury Secretary Lloyd Bentsen made a strong statement in New York Tuesday night defending the dollar. In a speech to a group of foreign policy experts, Mr. Bentsen denied that the administration is seeking a weaker dollar as a trade weapon. The dollar, he added, "is not a tool of our trade policy."
"My impression is that the markets wanted a strong statement from the administration on the dollar, and that is what they got," Mr. Hoffman said Wednesday. "I thought it was a pretty definite slatement." However, while the economists believe that the 'Fed should not raise rates in response to the dollar's slide, the group's consensus was that the central up by another quarter or half a percentage point by yearend. The group also reported on economic conditions around the country. The states and it commented
* New Enland: The "great recession" is over in New England, according to the economists. However, the upturn is uneven. Economic conditions more closely resemble a convalescence than a recovery in Connecticut, Rhode Island, and Maine. Massachusetts and Vermont are recovering, and New Hampshire is "rebounding," they said.
Looking ahead, the group expects New Hampshire to grow solidly at the expense of its neighbors, and Massachusetts to also grow steadily.
* Southern Atlantic states: Most states are doing well in this region, the group said, despite signs of slackening in selected areas. North Carolina and Georgia are showing strong growth, and South Carolina is growing at a moderate pace.
* Midwest: The heartland is still on a roll, the advisory group said, with strong showings in auto-related industries and capital equipment markets. Lending to finance inventories and receivables has picked up as well.
* California: The GoldenState has begun "a slow process of recovery," the group reported. Home sales are posting gains of 20% to 30% in most markets, while rents and prices are bottoming out in the nonresidential real estate market.
* Texas: The state's economy is showing solid growth, with employment running 3% above last year's level. Job growth is strongest in manufacturing, housing, retail trade, and business and educational services.
* New York: Employment in New York City rose during the first five months of the year, fueled by gains in services, financial institutions, real estate, trade, and construction.
However, the group concluded that employment in the city would continue to grow at subnormal rates, in large part because of corporate restructuring and the relocation of businesses outside the city.